Delta Tunnel Costs Are 2.5 Times the Benefits: Study

Delta Tunnel Costs Are 2.5 Times the Benefits: Study

Dan Bacher
7/31/12

The California Legislature recently failed to pass legislation requiring a cost-benefit analysis before the peripheral canal or tunnel is built—and it is no surprise that the bill garnered so much opposition from corporate agribusiness and southern California water agencies.

The first comprehensive economic benefit-cost analysis of the water conveyance tunnels at the center of the Bay Delta Conservation Plan (BDCP), conducted by the Eberhardt School of Business’s Business Forecasting Center at the University of the Pacific (UOP), reveals that the peripheral canal does not make economic or financial sense.

“We find the tunnel is not economically justified because the costs of the tunnel are 2.5 times larger than its benefits,” stated UOP in its report, released July 12. “Benefit-cost analysis is an essential and normal part of assessment and planning of large infrastructure projects such as the $13 billion water conveyance tunnel proposal, but has not been part of the BDCP.”

Perhaps the members of the Assembly Appropriations Committee, who rejected Assembly member Bill Berryhill’s bill calling for an independent cost-benefit analysis of the tunnel project, were afraid of a similar result if the bill, AB 2421, had ever become law.

“This report fills an important information gap for policy makers and water ratepayers who will ultimately bear the multi-billion costs of the project,” the UOP study stated. “The results can be easily updated if changing plans generate updated estimates of benefits and costs, but the gap between benefits and costs is so large that it seems unlikely that the tunnels could be economically justified in any future scenario.”

The study examined the benefits, including export water supply, earthquake risk reduction, export water quality benefits and environmental benefits, and compared them to the costs, including capital costs, operating and maintenance costs and in-Delta and upstream costs.

“We find a benefit-cost ratio of 0.4, meaning that there is $2.50 of costs for every $1 in economic benefits. When these very low benefit-cost ratios are considered alongside the inconsistent and incomplete financial plans, it is clear that the Delta water conveyance tunnel proposed in the draft BDCP is not justified on an economic or financial basis,” the report concludes.

More water for corporate agribusiness, less water for family farms

The report noted that the proposed “conveyance” is primarily an agricultural water supply project, since farms use twice as much Delta water as cities do.

“If costs are allocated on a per capita basis, Metropolitan Water District ratepayers would be responsible for 75 percent of the project costs (they are 18 million of the 25 million people who receive some Delta water), not the 25 percent that is proportional to the water they use,” the report said. “The use of financial feasibility analysis that allocates the full cost of the project on a per capita basis implies that urban ratepayers will be asked to pay large subsidies for agricultural water supplies in their bills.”

Ironically, while the Brown and Obama administrations and corporate agribusiness have constantly touted “improved conveyance” as the “solution” to providing “reliability” to agriculture in California, the project’s construction would likely do the very opposite to Delta agriculture, according to the study.

“The Delta Protection Commission Economic Sustainability Plan estimated a water conveyance tunnel would result in an average of $65 million in annual losses for Delta agriculture; including about $50 million in losses from reduced water quality, and an additional $15 million in annual crop losses from roughly 8,000 acres of farmland lost to construction impacts and the physical footprint of the facilities,” the document reveals.

In essence, the water conveyance tunnel would take large tracts of the most fertile land in California, the Delta, out of agricultural production in order to divert massive quantities of Delta water to irrigate subsidized crops on drainage-impaired, toxin-laced land on the west side of the San Joaquin Valley.

So not only does the peripheral canal or tunnel pose an enormous threat to the Bay-Delta ecosystem, but it is also not economically or financially feasible, according to the report. The taxpayers and ratepayers will foot the bill for the tunnel—which costs 2.5 times the benefits it will confer—while agribusiness tycoon Stewart Resnick, the Westlands Water District and other subsidized corporate agribusiness interests will profit.

“The common people will pay for the canal, and a few people will make millions,” said Caleen Sisk, Chief and Spiritual Leader of the Winnemem Wintu Tribe. “It will turn a once pristine water way into a sewer pipe. It will be all bad for the fish, the ocean and the people of California.”

The peripheral canal or tunnel, if built, would hasten the extinction of Central Valley chinook salmon, steelhead, Delta smelt, long-fin smelt and other fish species, according to both agency and independent scientists. This project, now being fast-tracked by both the Brown and Obama administrations, would result in the destruction of the largest estuary on the West Coast of the Americas.

Opposition to conveyance tunnel builds momentum

Opposition to the project continues. The day before the UOP report came out, Restore the Delta released a powerfully worded letter from 38 environmental, fishing, consumer, American Indian and other groups alerting U.S. Interior Secretary Kenneth Salazar of the enormous environmental and economic perils posed by the Obama administration’s support of the peripheral canal.

The administration is “poised to make an enormous mistake … and potentially drag the American people along with it,” the groups said.

“The planning for California’s water future must return to a lawful, science-based, inclusive, and transparent process,” the letter stated. “The San Francisco Bay-Delta Estuary must not be stripped of the freshwater flows upon which so many vital public trust resources and West Coast communities depend. From its inception, this plan has been crafted by, and for, South-of-Delta exporters. They have used their economic power to influence and rush this half-baked, multi-billion dollar water tunnel.”

The groups sounded the alarm after the Brown administration informed them that the state intends to proceed with construction of a peripheral canal or tunnel that the groups claim “would have devastating ecological impacts.”

Organizations signing the letter include the Sierra Club California, Environmental Water Caucus, Friends of the River, California Water Impact Network, Winnemem Wintu Tribe, Golden Gate Salmon Association, California Sportfishing Protection Alliance, Center for Biological Diversity, Food and Water Watch, Pacific Coast Federation of Fishermen’s Associations, the Planning and Conservation League, the Environmental Justice Coalition for Water and dozens of other groups.

“The idea that you’re going to commit to building a $50 billion tunnel around the Delta that current science demonstrates won’t protect the estuary, and only later revise the science, develop assurances and decide how to operate it simply doesn’t pass the smell test,” said Bill Jennings, executive director and chairman of the California Sportfishing Protection Alliance, a board member of the California Water Impact Network and executive committee member of Restore the Delta. “You can bathe this pig in perfume and apply lipstick, but it still won’t fly.”

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